Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act, 1961 challenging the order dated 16.06.2023 passed by the Income Tax Appellate Tribunal for Assessment Year 2010–11. The Tribunal’s order formed part of a common order dealing with AYs 2010–11 and 2011–12, though the present appeal was confined to AY 2010–11.

The assessment order dated 30.12.2016 had been passed under Section 153A read with Section 143(3) pursuant to search and seizure operations conducted on 25.04.2014 under Section 132 in the Dua group of cases. Although an authorization of search was also issued in the case of the assessee, it was undisputed that no incriminating material was found during the search. The additions made by the Assessing Officer on account of unexplained investment in unquoted shares were based entirely on entries already recorded in the books of account and examined during original assessment proceedings.

Issues Involved

Whether additions can be made in an assessment framed under Section 153A in the absence of any incriminating material found during search operations, and whether the Tribunal was justified in deleting such additions by applying settled law.

Petitioner’s Arguments (Revenue)

The Revenue contended that the Assessing Officer was justified in making additions under Section 153A once a valid search had taken place. It was argued that the Tribunal erred in allowing the assessee’s objections under Rule 27 of the ITAT Rules and in holding that assumption of jurisdiction under Section 153A was impermissible.

Respondent’s Arguments (Assessee)

The assessee argued that no incriminating material was found during the search and that, therefore, the Assessing Officer lacked jurisdiction to disturb completed assessments under Section 153A. It was contended that in the absence of incriminating material, the Assessing Officer was required only to reiterate the original assessment.

Court Order / Findings

The Delhi High Court noted that it was an admitted position that no incriminating material was found during the search conducted under Section 132. The Court held that the issue was no longer res integra and was squarely covered by binding precedents including Commissioner of Income Tax (Central)-III vs. Kabul Chawla, Commissioner of Income Tax-7 vs. RRJ Securities Ltd., and the Supreme Court decision in Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd.

The Court reiterated that in cases falling under Section 153A, where no incriminating material is found during search, the Assessing Officer is required to reiterate the earlier assessment and cannot make fresh additions. The Court also relied on its subsequent decision in Saksham Commodities Ltd. vs. Income Tax Officer, which reaffirmed the same legal position.

Important Clarification

The Court clarified that the distinction between Sections 153A and 153C does not dilute the settled principle that, in Section 153A cases, additions in respect of completed assessments are permissible only on the basis of incriminating material found during search. In the absence of such material, jurisdiction to make additions does not exist.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and upheld the order of the Income Tax Appellate Tribunal deleting the additions made under Section 153A in the absence of incriminating material. All pending applications were disposed of accordingly.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769677332_PR.COMMISSIONEROFINCOMETAX1VsMSCHARVAKTRADINGPVT.LTD..pdf

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